AT&T wants to pay TV channel providers based on the engagement they bring to its skinny bundles. However, companies like CBS aren’t likely to agree. They don’t need AT&T skinny bundles. They’re perfectly capable of managing their assets online, including NFL and the Super Bowl.

In an interview with The Information, John Donovan, the CEO of AT&T Communications expounds on his belief that TV providers should be compensated based upon the engagement their channels drive. He is trying out this idea today with the participants in the company’s $15-a-month WatchTV service. Many of the channels in WatchTV come from WarnerMedia, a division of AT&T.

He needs engagement pricing models to help him construct skinnier bundles of content more sharply targeted at groups of consumers. He believes traditional licensing practices have led to DirecTV Now have far more channels that it needs to be a “minimum viable product.”

Chapter 2: Is engagement pricing a viable solution (6:30)

Neither Will nor I believe engagement pricing is a solution which broadcasters will accept. Mr. Donovan argues that in an engagement-based pricing model, more viewership will yield higher revenues. However, we already have that. Most channels sell advertising at prices based upon the popularity of the TV shows delivered. In other words, broadcasters reap the benefit of engagement pricing and the benefit of high license fees. Why would they give up the high license fees to work with AT&T?

Chapter 3: Do Disney and CBS need AT&T skinny bundles (10:00)

Companies like CBS and Disney probably don’t feel they need any more skinny bundles. Both are advancing their direct-to-consumer offerings while maintaining pay TV revenues. Those vMVPDs that they are working with already pay far more for the TV channels than cable, satellite, and telcoTV operators.

vMVPDs don’t bring anything new to the market, aside from lower prices. The decline in traditional TV viewing doesn’t reverse when someone signs up for a vMVPD. The core transition to on-demand viewing in SVOD services continues. In other words, the market continues to transition to a model for which CBS and Disney are preparing. AT&T brings nothing new to the equation with more skinny bundles.

Will and I both agree that the transition to on-demand viewing will take a long time. In the meantime, there is still value in the vMVPD/MVPD model.

CBS is extending access to the Super Bowl to mobile devices. Anyone will be able to watch the game on any device without the need of a pay TV subscription. However, to watch regular season NFL games on CBS a viewer will still need a subscription to pay TV or to CBS All Access.

Continuing to restrict access could be a problem for the NFL, which has seen a big drop in the younger audiences. Younger audiences are also much more likely to watch through mobile devices. That said, they will be able to watch games for free through Verizon properties like Yahoo Sports. [Note: this point was not evident at the time we recorded the podcast.]